RIAA Blames the Net for Slumping Music Sales

The offspring of Napster tear into sales of CDs, with no end to the carnage in sight.

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The Recording Industry Association of America announced grim figures today that unit sales for all music products had plummeted by 10.3 percent from 2000 to 2001, the second year of decline in a row.

While all music products includes sales of cassette tapes, vinyl albums, and even music videos on VHS and DVD, compact disc sales comprise the lion's share of the products, representing 91 percent of total music product sales. The news for CDs is a little better: Following a 0.4 percent rise in unit sales from 1999 to 2000, unit sales dropped by 6.4 percent in 2001, the first decline since 1997. Reflecting overall price inflation, though, dollar sales dropped by only 2.3 percent through the year.

Why the big drop-off? In a statement, RIAA president and CEO Hilary Rosen states, "This past year was a difficult year in the recording industry, and there is no simple explanation for the decrease in sales. The economy was slow and 9/11 interrupted the fourth quarter plans, but a large factor contributing to the decrease in overall shipments last year is online piracy and CD-burning."

But it's the latter concern that the RIAA has tried the hardest to combat. Most notably, the RIAA has fought (and continues to fight) a long and public battle with Napster, the first service allowing users to share digital, MP3-encoded music for free, since first suing the company on December 7, 1999. Since successfully running Napster out of the free music market, the organization has taken on countless clones, including the companies behind Scour, Morpheus, Grokster, and KaZaA.

But whenever one such service has been shut down, ten seem to spring up in its place. Case in point: The "MP3 Search" section on CNet's Download.com service currently lists 112 such applications alone.

But can the music industry's bad news really be attributed to online piracy? A commonly offered argument has held that digital music sharing actually leads to increased sales of CDs, as consumers become exposed to a wider variety of performers than was previously possible through radioand as they look for better-quality recordings. P.J. McNealy, research director at GartnerG2, reminds us, "As much as there are external factors, such as 9/11, such as piracy, such as CD burners there's still one fundamental issue about the music industry: It's a hit-driven business. If you look at revenues of the industry over a 40-year period, they're up and down, up and down, up and down. It could very well be a factor that there just weren't as many hits."

Judging from the lackluster field at this year's Grammy awards, he certainly seems to have a point.

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